OECD Warns Australia about Further Rate Cuts

Australia has been cautioned by the OECD to keep further interest rate cuts “in reserve” and that the country’s booming housing market could be at risk of a “sharp correction”.

The warning from the Organisation for Economic Cooperation and Development (OEDC) came in its latest economic report on Australia.
Australia’s benchmark interest rate is at an historic low.
But cheap credit has fuelled a housing bubble in some cities, warn analysts.

In May, the Reserve Bank of Australia (RBA) cut its key interest rate by 25 basis points to an all-time low of 2%.

Rising property prices in Australia’s biggest city, Sydney, a strong currency and a drop in iron ore prices were among the reasons for the cut.

But Australia’s treasury secretary John Fraser said earlier this week that Sydney was “unequivocally” in a housing bubble.

A shortage of new houses, cheap credit and generous tax breaks, together with money from overseas investors, have sent the city’s housing prices sky high.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza